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Thursday, 20 February 2014

Facebook is paying $ 19 billion
to save itself from WhatsApp

Facebook is big. It has over 1 billion users. Almost everyone who is on the web has a Facebook account. Almost everyone who has a smartphone has the Facebook app installed.

But the success of Facebook in future is far from certain. The whole technology industry, the way we communicate through our gadgets, is undergoing a big change. And Facebook has not been exactly at the forefront of the change. When iPhones and Androids started reaching hands of consumers, Facebook was slow to grasp the trend. It treated the mobile part as afterthought and missed the chance to take a lead.

Facebook realized its mistake around two
years ago and since then is putting mobile first. But, by that time it was already a little late. It faced several big challenges. The two biggest were Instagram and WhatsApp.

Now, Facebook has bought both Facebook probably paid too much for both. It is a big company with lots of resources and it could have probably built similar services in less money. But it is possible that it panicked. Though it had reasons to panic.

Almost every Facebook user utilizes the
platform for sharing photos. But when
Instagram debuted on iPhone, it found favour among web users who not only wanted to share photos but also wanted the photos to look good. Instagram helped amateur users (people who are not too tech savvy) click - or
rather create - photos that looked great. It became popular because of its filters.
Facebook tried taking it on in the mobile
scene. It failed, realized that more and more people were using Instagram to share photos - something they earlier used to do on Facebook - panicked and made an offer that Instagram couldn't refuse.

With WhatsApp, something similar happened. From the looks of it, WhatsApp is an instant messaging app. But looks can be deceptive. The app has metamorphosed into the primary
communication tool, which is not only used to share text messages but also videos, audio files and images. The ability to form groups in WhatsApp means it has become a social
networking app and is a direct competitor to Facebook.

In fact, for most people who use WhatsApp, it is more important than the Facebook app on their phones.

While Facebook remains an excellent service, there is also a feeling among its users that the social networking site has become a little messy. Several revisions have left the Facebook timeline cluttered and devoid of any character. Most Facebook users have too many people as their virtual friends, with many of them being almost strangers. There
is too much noise on Facebook. On mobile, there are too many advertisements and promotions.

Facebook also looks a little confused about what its users want. It has tried Facebook Messenger, Chatheads, Facebook Home, but they haven't exactly caught on. It has also introduced concepts like hashtags and trends -
copied from Twitter - but so far there is no indication that users have liked these
features.

In contrast, WhatsApp is direct. It is more
personal. It has a sense of purpose.
WhatsApp has become an app that people use because they need. Facebook has become an app people (still) use out of habit.

In a way, buying WhatsApp is a pre-emptive move from Facebook. The social networking site is not going to get too many new users through WhatsApp. Anyone who is using WhatsApp, probably also has Facebook installed on his mobile phone. The revenue
potential too is not that clear at the moment. WhatsApp is not rolling in money. It charges users less than $1 per year after one year of use. It doesn't display advertisements. It
doesn't sell smileys or stickers. It doesn't try to bundle additional services or offer any premium pack.

Even if WhatsApp has one billion paying
users, the revenue with the current model is going to be around $1 billion. By any
account, this is a very modest figure for a
Silicon Valley company.

Facebook CEO Mark Zuckerberg pulled the trigger on massive deal for one reason: WhatsApp was turning into a huge competition. It was making mobile users spend less time on Facebook. This is the same reason why he spent almost $1 billion on an app that gave users photo filters.

Yes, with its massive reach, WhatsApp has potential to be a money-minting machine. But for now, Facebook is paying $ 19 billion to save itself from WhatsApp. How WhatsApp is going to help Facebook on mobile phones is going to be an afterthought.